- Live from your public media studios, WVIA presents Keystone edition reports.

A public affairs program that goes beyond the headlines to address issues in Northeastern and central Pennsylvania.

This is Keystone edition reports, and now moderator Larry Vojtko.

- (Larry) Hello, I'm Larry Vojtko Real estate prices have skyrocketed over the past year for a number of reasons, and there can be as many as a dozen offers on a single home.

In this episode of Keystone edition reports, we'll take a look at why it's happening, how buyers and sellers can compete and what it will take for the market to normalize.

Have you had trouble buying or selling a home?

Share your thoughts with our experts at 1-800-326-9842, send an email to keystone@wvia.org, or tag us on social with a #keystonereports.

WVIA's Paul Lazar takes a closer look at what's happening in the housing market.

- (Paul) If you've tried buying or selling a house in the past year, you know the competition can be fierce.

Homes are barely on the market before going under contract.

They're often selling for well over the asking price.

But the question is why?

Lower interest rates and the COVID-19 pandemic both played apart with many people working remotely.

They now have the opportunity to live farther away from where they work, which has led to people buying homes outside of cities instead of renting.

Scranton's work from here initiative is trying to capitalize on that and is advertising the electric city as an affordable way for people who work in New York city or Philadelphia to own a home while working remotely, but still have reasonable access to their workplaces.

So what will it take for the housing market to stabilize?

And what will it look like after it does?

It's not a simple answer, but interest rates will play a big part.

For Keystone edition reports, I'm Paul Lazar.

- (Larry) Well, now we need to hear from you.

We're ready to take your calls at 1-800-326-9842.

You can also email keystone@wvia.org, or message us through our social channels using the #keystonereports First, let's welcome our guests who are here to share their expertise in the real estate market.

Charlie Casco is the vice chairman of the board of the Institute for public policy and economic development at Wilkes University, and serves as the housing task force chairman.

Dr.Stephen O'Connor is a professor of practice and real estate in the Freeman college of management at Bucknell university.

And Pamela Anslinger joins us on zoom.

And she's the home ownership and financial services manager at NeighborWorks Northeastern Pennsylvania.

Well, welcome to you all.

And let's start with you, Mr. Casco, the Institute earlier this year, put out a, a, a in-depth report on housing equity and housing equity.

So first let's just try to define what housing equity is.

- (Mr.Casco) Well, very simply put it's it's the, the value of the property, less than the amount of money you on it, your mortgage on it.

So if you own a property that's valued at 200,000 and the balance on your mortgage is 150,000.

You have $50,000 in equity in your home.

- So this in this report, you're looking at trying to trying to affordable housing for people in a variety of different situations.

- Yes.

- So can you give us a little bit more information about what that study had found for our region in Northeastern and central Pennsylvania?

- Well, we use.

You know, when, when you first glance and you look at, we, we've always touted that we have affordable housing here in Northeastern Pennsylvania.

The reality is, is, are most of our housing stock is older and it's become an issue in the sense that yes, well, the price tag is it may be affordable at a glance.

The understanding is what do I need to do to make this home livable?

What improvements do I need?

Does it need a new roof, which could be an upwards of 10, 15, $20,000?

Does it need new windows?

Does it need new kitchen?

So those types of issues, you know, we need to address as a community, understanding where we're at, what our housing stock looks like, and how can we make this truly affordable and livable as well?

- Well, there's been a skyrocket in the, in, in housing, and we have a couple of slides that are available here to show us that, you know, this, this precipitous or this, this rise in housing cost and, and home sales and things.

So let's take a look at this.

We have a slide here of residential new home sales for the month of August, 2021.

We'll take a look at that and you can see how we have the, the houses sold.

We're going to talk a little bit about how this market is, is so volatile and next we have new residential construction in August 2021.

Let's take a look at that, that graph, as well as we're looking at this new residential construction and adjusted, we could see that from August, 2016 through 2021, and we could see how there was a big spike last year.

It's come down a little bit this year.

So let's talk a little bit more about where we are in this market for, for instance, month over month, year over year, how has the prices, what has caused the prices to spike so much?

- Well, there are a couple of things.

First of all, the inventory, I mean, it really is that simple and yes, housing starts are on the rise, but if you go all the way back to 2008, the housing crisis, when we just, before the crisis of 2008, we were pushing nationally, almost 2 million housing starts a year.

We plummeted the following year to right around 500,000 housing starts.

And then we slowly come back to where currently we're running about 1.6 million.

And when you equate that to our area, well, we didn't have as large of the peaks and valleys as they did nationally.

We still had them.

So it's not that we just have an influx of people that all need houses, the amounts that the needs aren't that much different than they've been.

They've been trending upwards, but they've been staying.

What's really been the, the problem is, is the drop off on, on the, the building of new homes and the building of new apartments, you know, apartments, you know, rentals are just as much of a problem.

So that's really driven and it's is supply and demand.

So now all of a sudden you have, you know, that fewer houses on the market, you know, the demand is great because we have a strong economy.

We have a incredible region.

We are growing and, you know, the future looks bright for our region, but we've got to get this housing crisis under control.

And it has, it has pushed up housing prices year over year, as high as 30% in some cases.

- All right.

So, Dr. Dr. O'Connor, let's, let's talk with you a little bit about, we're talking about affordable housing.

Okay.

What makes housing affordable?

Is there some kind of benchmark that we're using to, to, to base that on how, how do we define that affordable housing?

- (Dr.O'Connor) Well, it's a rather cold calculation.

It really basically says that we shouldn't be, or the government tells us that we shouldn't be spending more than 30% of our income on housing costs.

And if we do, then we're tactically classified as cost burdened.

The revenue for that, or the income for that is typically set at 80% of area median income.

So it's a rather cold formula.

Unfortunately, it's also static and it hasn't changed over the course of decades.

So there really is no consideration for cost of living, transportation, other types of assets or facilities or community assets that could really make affordability go up or down.

It's really just static.

And so it's, it's a big problem.

It's a really big problem.

So affordability, fortunately has, has been benefited by the low interest rates that we've had, right.

But of course, what all sets that is the precipitous increase that we've had in housing costs and housing value.

And so while it, the, the money is cheap, the values of the, and the sale prices of homes have actually gone up, as Charlie said, you know, 20, 25% over the last year.

If I can, Larry, let me just circle back a little bit to what Charlie was saying and that, you know, we, we do talk about the lack of production in the United States and it is down.

There's no question about it.

If you look at Pennsylvania, for instance, from the time period between 2000 and 2000 or 2001, to 2010, the state issued 363,000 building permits, right from 2011 to 2020, they issued 2,000, 221,000.

So a 40% drop in overall production housing production in the state of Pennsylvania.

The, the high point here, the state was in 2004, when the state issued just slightly below 50,000 building permits 2016, 17, 18, and 19 each year, the state issued less than 25,000 building permits.

So it's, it is a function as hard as it seems that we don't have enough units.

We don't have enough production.

Now I'm fortunate enough.

I teach out in Lewisburg, Bucknell university, beautiful farm country, unbelievable farm country.

You could drive around in a radius of 10 or 15 miles and never see a new housing development period.

None, no production whatsoever.

So it's it.

It's classic economics, right?

We have an increase in the demand and supply hasn't been able to keep up.

- I actually, I'm kind of confused by this because you're saying that there aren't enough, there's not enough housing for the population of people who want houses.

And yet this region and Pennsylvania in particular, in general, this region in particular are losing.

We're losing residents, we're losing populations.

So why is there, why is there this demand for housing, if we're losing population.

- It's really, oh, I'm sorry.

- Go ahead.

- It really is interesting because you know, the new 2020 census just came out and it told us that 52% of the counties in this country lost population and Pennsylvania, 65% of the counties lost population.

Okay.

The places that gained population were around metropolitan areas, Philadelphia county, and like Coleman county, et cetera, et cetera.

Right.

So, so you'll have this kind of conundrum there just, as you talked about Larry, you know, we're, we're losing population in the rural areas.

People are going more toward the metropolitan areas.

And so, and yet in those metropolitan areas, we're still not keeping up with, with demand and production.

- So, so again, a first cause is a supply problem.

So demand is outstripping supply.

What might be an another cause?

And let's just take a look at what has been causing a disruption in just about everything and the pandemic and COVID-19 Charlie, is there something, has the, COVID-19 had much of an impact?

- Well, again, it goes back to the building and even the remodeling stage, I mean, labor is at a major shortage everywhere.

And anyone you talk to any builder, any developer, any remodeler, they're all having the same thing with labor.

Material has gone through the roof double and triple in some cases it's been astronomical.

A lot of projects been put on hold that people don't want to build or remodel, you know, while these prices are so high.

So there's a lot of other, you know, factors that contribute to the overall situation we're in, you know, and one of the things too, that I think as the data comes out over the next couple of years, you're going to see that our region truly has stabilized.

We're not losing as much as we used to.

And we do have more of an influx of people coming in because we truly become a bedroom community again.

And we become a distribution hub.

So we are seeing that.

And the other thing too, there's another factor that's contributing is that we're seeing a lot more aging in place.

So there's not as many seniors selling off and moving into the nursing homes, aging in place is really actually a good thing for our community.

We've done a recent study on that.

It's something that we should all promote, but it also contributes to what's on the market.

And the last thing is what we call the circle effect.

And that's the fact that, geez, I want to sell my home.

I really, but where am I going to go?

What am I going to buy?

So there's that hesitancy that, you know, circles back and doesn't allow.

So there's so many factors there.

- I could see that, you know, it's they say it's a sellers market, but you know, I'm going to sell my house for, you know, X more than I would have two years ago, but then I have to buy something else in this market.

And, and, and I, I might be pricing myself out.

I might be just safer just staying where I am for the time being well, we'd like you to be part of the conversation.

So please do give us a call.

If you have a question or comment or email us keystone@wvia.org, or a comment, or ask a question using the hashtag Keystone reports using social media.

Our, our third guest is Pamela Anslinger.

And she's from NeighborWorks.

Pamela, thanks for being with us and introduce us to what NeighborWorks does, what your purpose is, your services and what you've seen about how this particular housing, the circumstances of the housing market now has affected what, what the organization is experiencing.

- (Pamela) Sure, thank you so much for having me.

NeighborWorks is a nonprofit organization that focuses on creating opportunities for individuals and families to improve their lives through quality housing and financial guidance.

So most of our clients come in and we work with them to maintain their finances, improve their current situation, to be able to access affordable home ownership.

We also work with current homeowners to remain in their homes through aging, in place programs, as Charlie mentioned.

And then we also help current homeowners who are struggling with their payments through some foreclosure work.

So our focus really is as a home ownership center and helping people to be able to access affordable housing.

This past year has definitely exacerbated the situation through most of our clients do tend to fall in the low to moderate income range and the competitive nature of a seller's market and lack of inventory, which we have already mentioned has really created a situation where your low and moderate income earners aren't able to compete.

They're not able to ask above, or I'm sorry, offer purchase, purchase prices and compete and put in offers above the asking price.

- How, how do you see this playing out in the next few few months is obviously like, how do you, how, how, you know, what is the, what is the NeighborWorks doing to adjust to this particular circumstance now?

- Sure.

So some of the programs that we're offering our down payment and closing costs assistance, we currently are administering the city of Scranton program as well as Lackawanna county.

Those programs are designed to really make the purchasing of a home more affordable.

The goal is really to try to have as much funds go towards towards the down payment, as much as possible because when you have a larger down payment, it causes a lot of the closing costs to also decrease as well.

And that also results in a lower monthly payment.

You know, one thing that has really been happening a lot with our clientele is we're getting more people who are renters coming in and saying, I want to buy because my landlord is selling.

So with the higher home values are also investment properties are kind of starting to hit the market right now.

And we're not seeing as many single family homes for sale.

We're seeing more multi-units and investment properties, which is causing renters to become very uneasy and worried about their stability.

And they see home ownership as an opportunity to have a stronger foundation and more sustainability for their families as well.

- Dr. O'Connor, you know, at least since the end of world war two home ownership was seen as the best way for the middle-class to gain and then secure wealth.

Is that the is that still the case now?

And can we count on that in the foreseeable future?

- Well, yeah, I, I think, you know, I was able to put my two kids through college because, you know, the house that I lived in had appreciated significantly in value and I sold it, I refinanced it, I took that money.

It was able to, you know, to pay for their college tuition.

They came out with no debt.

I mean, that was a great gift that we were able to give.

Today how do they do that?

Right.

I mean, you know, my son and his wife and two kids live in San Francisco right now, they have a two bedroom apartment, they pay $4,500 a month.

They pay $2,500 a month for childcare.

You know, I mean, that's, you know, that's $7,000 a month.

You know, how much house you can buy for $7,000 a month.

It's unbelievable.

And more importantly, and maybe equally important is that my daughter-in-law came to that relationship with $192,000 in student loan debt.

So that generation, that millennial generation born in between 81 and 95, you know, they're, they're trying to tough it out a little bit because coming up with that down payment is, is really difficult when you have those kinds of expenses.

So, and the point that Charlie made before was perfectly salient in terms of people, you know, the boomers, my generation from 46 to 64, who are staying longer into our homes because we're living longer, you know, we're healthier, et cetera, et cetera.

That was usually a, a huge source of housing inventory.

You know, when it filtered down to the next generation or to the next move up buyer.

So if it's not becoming available and you're not building enough housing, then you know, you're in a situation where, where we are today.

- There's been some talk recently, and this will go to you, Mr. Casco, first that, and I think you mentioned this earlier that we have become something of a bedroom community there's been t-talk with since COVID and working remotely, that people are moving out of the cities and there's migration into, into the areas, is that playing any significant part in this particular circumstance?

- I mean, it really is a starting to, and not just the bedroom community in the sense that, you know, years ago, everybody retired automatically moved to Florida or moved to Arizona or whatever.

We're seeing more and more people staying put two to stay close to.

They might be moving out of New York city or out of New Jersey, but they're coming to areas like ours because they're still going to be close to the family, but then they're in an, an affordable, you know, living situation here in Northeast Pennsylvania.

Cause we offer, you know, a lot of great things here, but there's just so many variables.

What the key to all this is, is that there's organizations like NeighborWorks and like the Institute that are looking at toolkits and looking at, you know, ways to overcome some of these issues that we're dealing with, because they're not short term, there are longterm issues that we have to address as a community.

And if we put our heads together, all of us, and we look, there's some great programs already out there, the 203K program, for example, through HUD that allows an owner buy a property that needs to be fixed up, borrow the additional money as part of the mortgage and get it fixed up.

There's all these different programs.

And, you know, as I said earlier down payment assistance, education and all that, we just need to put it out there for people to have access to it and give them the ability to find it.

And then we also have to look at the barriers to building additional housing and how can we eliminate some of those barriers?

- I just went on that on, on that topic we have, we will have on our website after the program is over.

You'll be able to watch this again and we'll have different sources for you and links and other information.

Ms. Anslinger, I'd like you to follow up on that.

What, what, what else can the various stakeholders in this from realtors to nonprofits, to government agencies, What more can we do?

And are we doing enough?

Is it a matter of better coordinating these, these various stakeholders in, in helping achieve affordable housing?

- You know what Charlie was talking about with the 203K loan loans?

Those are a great opportunity for our area because we have such an older housing stock.

We do have many vacant properties that are uninhabitable and what the right type of investment they could become affordable housing or put back on the market and increase inventory.

I unfortunately, there's just not a whole lot of awareness around those programs.

A lot of them tend to go towards people who have more wealth and more cash to bring to the table.

And I think there could definitely be an opportunity there between lenders and realtors, if there was more education on programs like that on how to access them and how to use them, that process can be very complicated because there's extra steps and layers to that type of financing, such as, you know, multiple appraisals to make sure that the home is going to be worth the total investment of the purchase, plus the rehab.

And, you know, with the increase in costs, such as materials and labor, it's sometimes hard to get the end result that you're looking for.

So it, you know, to that, if you're purchasing a home for $60,000 and it needs $40,000 worth of investment, but at the end of it, it's only going to appraise for 90.

You know, you have to go back to the drawing board and try again and get to that 90, or find another way to increase the value.

So having the right people in the right partners in that is really critical with the 203K loan specifically, they also required certain contractors and not a lot of contractors are certified to work with that type of government financing.

So I think that's a really good opportunity as well.

- Well, we're quickly running out of time.

Just a couple of minutes.

We do have time for a question though.

When do we expect all of these costs to come down?

Does anybody have a prognostication skills, material costs and things of that sort, anybody see anything in the future?

Mr.Casco?

- I mean, it's so difficult to tell there's so much going on in Capitol hill with the influx of, you know, the, these different programs and what it's going to do to our economy and rising costs is yet to be seen.

I do believe that, you know, we're going to stabilize a bit.

I don't think you're going to see a big drop off in prices.

I think this, you know, a lot of this is going to become our new norm.

The key to it is patience.

Not making sure that you're not overpaying because you're too anxious to get a house that, you know, maybe that's the key right now is be patient.

Look for the big programs, wait for the right home to come along.

- All right, well, I'll, I'll address this first to Dr. O'Connor, but everyone is invited to give their suggestions.

What two or three suggestions would you have to a person that's looking for house in the market right now to try to help navigate through this particular situation?

The circumstances that we have, Dr. O'Connor.

- Well, there's, there's no silver bullet.

I wish I could say to somebody that, you know, again, Charlie said be patient absolutely be patient.

If you're willing to sit on the sidelines for a little bit, see what happens.

I think in a lot of different markets, what we're starting to see is that there is a softening that for the first time, in a long time, people are starting to reduce their prices.

People are worried about inflation.

All of a sudden interest rates are going to go up.

Right now they've jumped.

You know, they're not, it's not a huge jump it's, it's still less than three and a quarter percent on a 30 year fixed rate mortgage.

But again, this is as inflation starts to increase as mortgage rates start to increase people, start to pull back down a little bit, and then you get to say to yourself, well, I'm going to miss out on the best interest rates of my life.

But then again, for those of us who have enough, you know, snow on the mountain, so to speak.

And I remember coming out of graduate school and interest rates were in the mid teens, you know, so it's so be a little patient.

I love the idea of trying to find some, some properties that re really need fixing up.

I mean, there's an incredible amount of inventory out there that exists.

So I can't remember the exact percentage of the homes in Pennsylvania that were built before world war two.

You know, it's incredible.

So it's be patient be innovative and, and Charlie's advice is really spot on.

Don't jump in.

- Well.

Thanks.

That's what I did.

I bought a fixer upper and I'm going to fixing it up for years.

I would like to thank our panelists for participating and thank you for joining us for more information on this topic, please visit wvia.org/keystonereports.

And remember you can rewatch this episode on demand anytime online or the wvia app.

For Keystone edition.

I'm Larry Vojtko.

Thank you so much for watching.

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